After Brexit and the election of Trump, the financial world is entering a momentous period of adjustment
OREANDA-NEWS. After Brexit and the election of Trump, the financial world is entering a momentous period of adjustment. "We can expect more change in financial markets over the next three years than we have experienced in the last thirty" – according to award winning fund manager Gervais Williams in his third book, being released on Monday.
The Retreat of Globalisation will be published on 5 December 2016 and a large launch event will take place that evening in Central London where Williams will talk about his views. "To date government and central bank stimuli may have boosted market valuations, but at the expense of distorting the corporate landscape. The ongoing deferral of corporate renewal has left the world economy drifting into stagnancy."
Williams argues that it's the electorate who have chosen to invoke political change to break the cycle. This will initiate a radical transition in economic policy, and market trends, which demands an equally radical change in investment strategies.
"Corporately this involves a period of renewed challenge, when the financially fragile and commercially overstretched will be further tested. Already share prices are diverging more than usual following the Trump success. Get used to it. In future 100% of stocks in portfolios will need to be well positioned to generate a return. Actively limiting the downside risk within portfolios will become just as important as finding those offering potentially attractive returns."
"Index funds, ETFs and all other passive strategies have passed their sell-by date. This just isn't the time to invest in funds with no conviction in their 8% holdings." says Williams.
The book goes on to outline some of the metrics that will define success going forward. In particular Williams suggests that prioritising individual stocks that are investing for productivity improvement, and those which offer outstanding service levels, will outperform disproportionately in future.
Readers of The Retreat of Globalisation will be alerted to the contrast between the long period of stability of asset allocation preferences over the last thirty years, relative to the scale of change now coming through.
It highlights the dangers of sitting back with a status quo portfolio when changing market trends could undermine future returns. The book seeks to offer investment strategies that are better placed to address the forthcoming challenges as well as detail on some of the metrics to identify the best performing companies going forward.
About the Author
Gervais Williams has been an equity portfolio manager since 1985 and has a long history of generating premium returns. He is currently Managing Director of Miton Group plc and one of the most prescient commentators in the City of London. He has written two previous books, Slow Finance (2011) and The Future is Small (2014). He has a long history of anticipating market trends. For example, in 1995 he championed the advantages of investing in Ireland ahead of them joining the Euro. The Gartmore Irish Growth Trust plc was a new Investment Trust set up to take advantage of the potential, and went on to generate a 10 fold return over the following twelve years.
Williams also raised concern about markets peaking out at the end of the credit boom ahead of 2007. He recommended all clients buy Put options on their portfolios ahead of this period. This strategy was adopted by the Gartmore Growth Trust plc and it greatly assisted performance during 2008 and 2009. The Put option was sold in October 2009, so the Trust had around a third of the fund in new cash to invest in extra holdings at the bottom of the market.
In 2011 Williams anticipated that income stocks would progressively outperform growth/value stocks, and proposed a multi-cap equity income strategy investing freely over both the largest and the smaller stocks. This prompted the setting up of The Diverse Income Trust plc, and the CF Miton UK Multi Cap Income OEIC in 2011, and both have gone on to be the best performing UK equity income funds since that time, and have done so with unusually low portfolio volatility too. The detailed thinking behind the strategy was set out in his first book - Slow Finance - published in 2011.